On May 30, 2014, the National Labor Relations Board ruled that terminating an employee for deliberately violating an overbroad and unlawful confidentiality rule did not run afoul of the National Labor Relations Act. Flex Frac Logistics, LLC, 360 NLRB No. 120 (May 30, 2014). In a supplemental decision, Members Miscimarra, Hirozawa, and Schiffer agreed with the Administrative Law Judge that the employer lawfully terminated an employee pursuant to an unlawful work rule.

Flex Frac Logistics, LLC delivers frac sand to client energy companies for use in oil and gas drilling. Flex Frac made these deliveries via directly employed drivers, as well as through the use of contractor trucking companies. Understandably, Flex Frac was greatly concerned that the rates it charged its clients stay secret. The company sought not only to avoid being underbid by competitors, but also feared that the trucking companies with whom it contracted would demand more money if the trucking companies could discern Flex Frac’s margins.

The employee worked in Flex Frac’s accounting department and was assigned to accounts payable. She was responsible for calculating driver pay, as well as amounts owed to the trucking companies. Importantly, she did not need to know the prices Flex Frac charged its clients for deliveries. However, like all members of the accounting department, she had access to those figures.

The employee was well aware of Flex Frac’s confidentiality rule, which was implemented so that employees would refrain from discussing client rates. Despite this clear understanding, in November of 2010 she told another employee that Flex Frac was “screwing over” its drivers because Flex Frac charged client companies far more for deliveries than it was paying out. She even tried to show her fellow employee a document detailing what Flex Frac charged its clients, which made the employee very uncomfortable. Accordingly, the coworker reported her conduct to a supervisor.

Moreover, only a couple of days after the employee discussed the client rates with her coworker, Flex Frac began receiving calls from its trucking contractors, who had heard what Flex Frac was charging clients. Armed with this information, the contractors demanded more money. Despite refusing to reveal their source, Flex Frac assumed that the employee was the leak. She was terminated about a month later for violating Flex Frac’s confidentiality rule concerning client rates.

Despite holding in a prior decision that Flex Frac’s confidentiality provision was unlawful, the Board agreed with the ALJ that Flex Frac’s discharge of Lopez did not violate the Act. The Board rested its decision on its holding from Continental Group, 357 NLRB No. 39 (2011), which explained that discipline imposed pursuant to an unlawful work rule “is unlawful only if the employee violated the rule by (1) engaging in protected conduct or (2) engaging in conduct that otherwise implicates the concerns underlying Section 7.”

The Board reasoned that Flex Frac had a legitimate business interest in keeping its client rates confidential. The employee knew of the confidentiality interest, but used her position to access the rates anyway. Once the rates became public, Flex Frac’s business did indeed suffer. Accordingly, the Board determined the Flex Frac lawfully discharged the employee.

[H]er deliberate betrayal of [Flex Frac’s] strong, expressly articulated confidentiality interest and the evident harm she caused were plainly and overtly the reasons [Flex Frac] discharged her.

The Board further noted that any possible chilling effect on the exercise of Section 7 rights would be minimal. The employee was not fired for discussing wages or other terms or conditions of employment.  Rather, Flex Frac terminated her as a result of her “gross misconduct.” Her coworkers, the Board reasoned, would readily understand that.

Employers will find that this case is a welcome respite from the recent slew of pro-employee decisions. While this case rests somewhat on its own unique facts, this case demonstrates that the Board understands, albeit in very limited circumstances, the need for employers to discipline employees who deliberately violate a work rule despite the fact that the rule is unlawful.

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